M&A Process Decoded: Sell Side, Buy Side, Stages, and Timelines

The M&A process involves many steps and stakeholders, both on the sell side and the buy side. In this ultimate guide, we'll outline the process from beginning to end, its timeline, and the stakeholders involved.

Because of the many steps in mergers and acquisitions, your business exit may be challenging if you do it alone. The entire process is just one cog in the wheel. You'll want to have the right team to maximize your outcome.

Exitwise exists to help founders and business owners like you find the best M&A attorneys, valuers, investment bankers, and other experts tailored to your industry. Book a strategy session with us at Exitwise to shape your way to a successful M&A deal.

What is an M&A Process?

An M&A process refers to the series of activities or steps a business or company goes through when acquiring or combining with another business or company.

The M&A deal process involves many activities, from pre-deal research and planning to due diligence and closing to transition and integration, which we'll discuss in this article.

What is the M&A Process Lifecycle?

The M&A process lifecycle is a holistic layout of the end-to-end course of action and chain of milestones a prospective merger or acquisition goes through between early exit planning or acquisition planning and post-closing integration.

What is the M&A Structured Process?

A structured M&A process refers to a merger and acquisition end-to-end workflow that follows a specific format or framework.

The purpose of the framework is to streamline the entire process and even allow for repeatability whereby buyers and sellers can imitate the design closely and achieve similar or nearly similar results.

What is the M&A Due Diligence Process?

As one of the many stages of mergers and acquisitions, the M&A due diligence process is the comprehensive examination and verification of information about a buyer, seller, and the potential deal.

Due diligence by the buyer on you and your business is called buy-side due diligence. The buyer reviews information about you and your business to determine if the business is right for them.

The due diligence you do on your own business is called sell-side or reverse due diligence. You can also conduct due diligence on the buyer and their company to ensure they fit your business and interests.

What Are the M&A Process Stages?

The M&A process stages are the interrelated major functions under which interconnected activities or tasks are completed consistently to result in a successful merger or acquisition.

Each stage comprises several tasks that may be broken down into further activities.

Let's check out the typical stages of mergers and acquisitions on the sell side:

1. Ideation and Preliminary Plans

The sell-side process usually starts when you decide to sell your business for a specific motive.

The initial plans may include preparing your financial statements, hiring M&A consultants, and preparing company and marketing documents.

The plan can also include initial sell-side due diligence, valuing the company, preparing a virtual data room, and marketing the company. You can use the free Exitwise valuation calculator to estimate the value of your company.

2. Potential Buyer Evaluations and Initial Negotiations

Once your M&A team markets your business using a teaser and receives M&A Indications of Interest and bids, they can review them to qualify the buyers. 

The team can also meet potential buyers and review and negotiate critical issues in Letters of Intent, term sheets, the final merger agreement, and the final definitive purchase agreement.

3. Final Negotiations and Closing 

Your M&A advisory team can negotiate further with the buyer you choose and agree with them on the deal structure, final sale price, warranties, limitations, and indemnities.

The involved parties then sign the purchase agreement to close the deal.

4. Post-Closure Implementation

The transition and integration tasks after the deal closes include fulfilling the buyer’s conditions, transferring ownership, and helping the new owner settle into the company.

Other tasks may include announcing the sale, purchase price allocation, compliance, getting any pending consents, and announcing the sale.

M&A Process Timeline

M&A processes typically have varying timelines, depending on deal complexity, the preparedness of both you and the buyer, and market conditions.

The timeline can be a month or a few months to one year or several years.

Since delays can kill a potential business sale, you'll want to ask for a fair purchase price, find the most fitting buyer sooner, and time the sale correctly in relation to the prevailing market conditions.

Sell Side M&A Process Activities

Here's what your mergers and acquisition process may look like:

1. Early Exit Planning: As mentioned, the sell-side M&A process typically starts when you decide to sell your business. You may also receive unsolicited purchase offers from prospective buyers.

Some activities at this stage include preparing financial statements, initial reverse due diligence, and informing your employees of the potential sale.

2. Hiring M&A Experts: Handling the sale on your own can be overwhelming.

You'll need to hire the right M&A experts to help with tasks such as preparing a comprehensive M&A exit plan, meeting up a virtual data room, valuing your business, and preparing marketing and other deal documents.

3. Marketing Your Business: Your M&A team makes a teaser and sends it to their pre-screened pool of potential buyers to notify them of the sale and auction of your business.

4. Reviewing and Responding to Indications of Interest: Once potential buyers review the teaser, they may send Indications of Interest or bids. Your M&A team can help review and respond to them. 

5. Sending Non-Disclosure Agreement: The M&A team may send a non-disclosure agreement (NDA) to each prospective buyer and wait for them to sign it.

6. Sending Confidential Information Memorandum: Prospective buyers who sign the NDA may receive a Confidential Information Memorandum (CIM) from your experts.

7. Reviewing and Responding to Letters of Intent: Potential buyers still interested in your business may send Letters of Intent to purchase (LOI) or M&A term sheets, which your team helps you review and negotiate appropriately.

8. Reverse Due Diligence : An accepted Letter of Intent or term sheet typically kicks off the buy-side due diligence. As the seller, you can conduct deeper reverse due diligence to pinpoint any issues your buyer may find.

9. Drafting and Negotiating the Merger Agreement: If the potential buyer is satisfied with your company after buy-side due diligence, the M&A teams from either side collaboratively draft and negotiate the merger agreement.

10. Negotiating the Definitive Purchase Agreement: Once you have agreed on a proper deal structure, purchase price, closing conditions, and other aspects captured in the merger agreement, the buyer's M&A team sends your team the draft definitive purchase agreement.

Your team helps you review and negotiate the agreement.

11. Closing the Deal: The M&A deal closes when you, the buyer, and other stakeholders sign the definitive purchase agreement.

Some tasks at this stage may include transferring ownership to the buyer, receiving payment, fulfilling any pending closing conditions, and sell-side purchase price allocation.

12. Transition and Integration: After the transaction ends, the M&A teams kickstart the transition and integration process. You may continue working with the new owner or help them settle into their new role.

Mastering the whole sell-side M&A process can be tricky. We can help you find the best M&A experts in your industry to streamline it. Reach out to our Exitwise team members today to get started!

Buy Side M&A Process Activities

Here's what the process of M&A looks like on the buyer's side:

1. Developing an Acquisition Strategy: Buyers may define their goals for different acquisitions, consider market conditions, analyze their financial position, and search criteria for target companies.

2. Finding Target Companies and Sending LOIs: Potential buyers usually actively look for fitting target companies and send unsolicited purchase offers.

3. Reviewing Teasers: The buyer's team can review teasers received from business owners or sell-side M&A experts.

4. Preparing and Sending Indications of Interest: If the buyer likes the company described in the teaser, they can send the sell-side an Indication of Interest.

5. Reviewing, Negotiating, and Signing NDA: The buyer receives a confidentiality agreement from your M&A experts, which they can review and negotiate before signing.

6. Review Confidential Information Memorandum: The buyer considers the information shared in the CIM and virtual data room.

7. Sending LOI or Term Sheet: An interested buyer sends you a Letter of Intent or a term sheet to indicate their desire to continue with the deal.

8. Conducting Due Diligence: The buyer conducts deeper due diligence on your company's financial position and organizational structure, among other aspects.

9. Merger Agreement and Negotiations: The buyer collaborates with the sell side to draft and negotiate the agreement of the merger.

10. Draft and Negotiate the Definitive Purchase Agreement: The buyer's M&A attorney drafts the definitive purchase agreement and responds to negotiations your team raises.

11. Closing the Transaction: You, the buyer, and any other buy-side stakeholders sign the definitive purchase agreement to seal the deal.

The buyer can make payments as agreed, announce the purchase, and conduct buy-side purchase price allocation. 

12. Transition and Integration: The buyer takes over their new company and focuses on retaining key employees, achieving synergies, cultural integration, and monitoring performance.

Steps to Mitigate Risks in the M&A Process 

You can take the steps below to manage mergers and acquisitions risks:

• Have a due diligence checklist to ensure you conduct adequate sell-side due diligence.

• Understand all the possible risks and their causes before attempting mitigation.

• Manage risks continuously pre-deal, during the deal, and after closing.

• Research the culture of the buyer even before due diligence.

• Combine integration plans with due diligence.

Use Exitwise to Find the Best M&A Experts

We built Exitwise to help founders and business owners like you hire and manage the best specialized M&A experts, such as investment bankers, attorneys, accountants, and business valuers.

We follow a proven three-stage process that involves an initial consultation, interviewing and hiring experts, and negotiating favorable terms with them on your behalf.

Consult with us to find your dream M&A team for an optimal exit.

Frequently Asked Questions (FAQs)

Check out these common questions about the M&A process:

What is a Hostile Takeover?

A hostile takeover is an acquisition in which the acquirer doesn't seek the consent of the management team and instead negotiates directly with the company's shareholders.

Who is Involved in the M&A Process?

The M&A process typically involves the buyer, you as the seller, and the M&A teams of both sides.

The M&A team we help you work with at Exitwise usually includes wealth advisors, investment bankers, corporate attorneys, business valuers, tax accountants, and brokers.

How Do Mergers Differ From Acquisitions?

In a merger, two or more companies combine to form a new entity, and the old companies cease to exist.

In an acquisition, the acquirer takes over the target company, which usually continues as a subsidiary with the acquirer as the parent company.

What is the Difference Between a Vertical and Horizontal Merger or Acquisition?

A horizontal merger or acquisition involves direct competitors at the same level of the supply chain combining into one entity to lower competition and increase market share.

In a vertical merger or acquisition, companies operating at different stages of the production process or supply chain combine to lower costs and improve supply chain efficiency.

Conclusion

Working with the right professionals and mastering the M&A process on both sides of the deal can help you sell your company sooner and at the best sale price possible.

Chat with us at Exitwise today so we can help you hire your dream M&A experts to simplify the process for you and maximize your exit.